Gasoline prices could go up if a rail strike happens

Gasoline prices could go up if a rail strike happens

A potential rail strike that would disrupt supply chains could happen in as little as 48 hours unless unions and management can strike a deal.

Ahead of the September 16 bargaining deadline, freight rail lines stopped accepting shipments of hazardous and security-sensitive items, and passenger train company Amtrak suspended long-haul service on Wednesday. Shipping lines are equipped with rails to ensure that any sensitive and potentially dangerous cargo is not left unattended.

Railroad workers said they were punished for taking time off to go to doctor’s appointments or even family emergencies.

Ten of the 12 unions have reached agreements as of September 15 while talks are still underway with the Muslim Brotherhood of locomotive engineers, trainmen and the intelligent transportation division.

Discussions are still underway to avoid bringing the US into a standstill with a national rail strike if unions do not win their demands from Warren Buffett’s BNSF, Union Pacific UNP and other major rail lines.

The White House is working to ensure that essential products carried by railroads can continue to move, including food and energy products such as ethanol, a key ingredient used in gasoline blends.

Commodity markets may face price hikes

However, the commodity markets could face major disruptions if the strike occurred and lasted for more than a few days. That’s because shipments of energy and agricultural products such as grain will be delayed, leading to shortages and potentially higher prices.

The strike risk had the greatest impact on ethanol as 70% of the commodity is shipped by rail. Ethanol prices surged past $2.60 a gallon on September 14th.

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โ€œNearly all of the ethanol is transported by rail and produced in the Midwest,โ€ said Debneel Choudhury, vice president of refining and marketing at S&P Global Commodity Insights. “There is no easy alternative to rail and the US government will have to make decisions about blending targets if ethanol’s movements to demand centers are restricted due to the strike.”

He said near-record low inventory levels of gasoline and diesel in the United States are a problem because 15% of all crude and refined products are transported by rail.

“The timing of this is at an inopportune time,” Chaudhry said. “Railways are essential to keep stocks in balance. Without that we may see net import regions like the Northeast United States facing shortages.”

Pete Meyer, head of grain and oilseed analytics, S&P Global Commodity Insights, said food supplies could also be disrupted by how far the United States is in the crop cycle.

“…the railway strike would constitute a major obstacle to the movement of both grain and fertilizer required for autumn uses after the harvest,” he said. “The ramifications will be far-reaching as global supplies of grain remain constrained by the ongoing conflict in Ukraine and US farmers need to prepare their acres for 2023 soon.”

Coal prices also rose in anticipation of the strike and demand increased due to the ongoing war in Ukraine and European Union sanctions on Russian coal.

Impact on gasoline prices

Gasoline prices could increase by 35 to 75 cents a gallon if the strike lasts more than a few days, said Patrick de Haan, head of petroleum analysis at GasBuddy, a provider of retail fuel pricing information and data in Boston.

The strike could reverse many of the downtime drivers have received over the past three months. Gasoline prices have fallen for 13 consecutive weeks after hitting a national high of $5.03 per gallon on June 14.

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He said ethanol is mixed with gasoline and since it cannot flow into an oil pipeline, the strike will hamper the refineries’ capabilities.

“Across the country, regular gasoline contains 10% ethanol. The concern is the additives and blending โ€” if there’s a strike, the ethanol can’t get into the gasoline,” de Haan said.

In 2005, the Renewable Fuel Standards Program was signed into law by former President George W. Bush. It requires increasing the amount of renewable fuel used in gasoline. The question, he said, is whether the EPA will relax these rules.

“If the ethanol can’t get where it needs it, then you have a supply problem,” de Haan said. “Right now, that’s not a major concern. I’m not too concerned about it at this point – speculation on gasoline production and prices. It’s something to watch.”

Railway workers lack schedules

Railway employees complained that companies failed to provide adequate leave and did not provide timetables.

One worker, Bill A. Chico, said in a Facebook post that “about half” of rail drivers are on call 24/7 unless they are on their own time or already at work. We don’t have a schedule, not a single schedule is in contact.”

Chico said he’s been employed for 16 years and only gets three weeks of vacation and nine personal days a year.

“The railways do their best to make us look like bad guys here but we’re not, we just want to see our family and live a little bit,” Chico wrote on Facebook.

He added that rail companies want to schedule all personal times, which is unrealistic.

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“How do you schedule a funeral in October if it’s only February? Schedule an unannounced wedding? Schedule a date to take your wife to the doctor?”


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